Are you one of the homeowners whose mortgage isn’t eligible for the government’s COVID forbearance protections?
Home loans not backed by the federal government are excluded from the protections for borrowers implemented by FHFA .
But as much as one third of US home loans are not backed by the federal government. If that includes you, here’s what the National Consumer Law Center has to say about your options in times of COVID-19.
Assisting Homeowners Who Do NOT Have a Federally Backed Mortgage Loan
If a homeowner has a mortgage loan that does not meet the definition of “federally backed mortgage loan,” CARES Act protections do not apply (except for the credit reporting provisions in CARES Act § 4021, discussed above).
State Foreclosure Relief
Many states have adopted broad foreclosure moratoriums that protect borrowers regardless of loan type, and some states have instituted mortgage loan forbearance programs.
For a continuously updated list, showing which actions are still current, see Covid-19 State Foreclosure Moratoriums and Stays.
Voluntary Federal Guidance
Federal bank regulators have issued guidance encouraging institutions to work with borrowers and relaxing some standards that may previously have limited a servicer’s flexibility to offer relief.
How to Get Non-CARES Act Relief and What to Ask For
Borrowers should contact their servicer by phone or online. Online may be the faster option as servicers are currently overwhelmed by the number of calls they are receiving. Log in to the borrower’s account and see what options the servicer is offering. It may be possible to apply online.
Borrowers can also request assistance by writing to the servicer. Check the servicer’s website or a recent account statement for the appropriate mailing address. Letters to the wrong address may be delayed or lost (or not effective if intended as a Request for Information).
Frame the letter as a Request for Information (RFI) about loss mitigation options. Such a letter will be governed by the response rules in RESPA’s Regulation X.
A sample RFI borrowers may use to ask about available loss mitigation options can be found here (PDF version) (MS Word). A sample RFI that advocates may use for information about a loss mitigation application can be found at of NCLC’s Mortgage Servicing and Loan Modifications Appx. E.2.7.
There is a private right of action to enforce these rules.
Used with permission. The entire NCLC article is found here.
Protecting your home
For those with loans not backed by the government, the options are clearly going to be less standardized and less predictable.
It’s worth watching the news for further government programs that impact non-federal home loans: the situation is certainly in flux.
Know that if you can’t reach an acceptable deal with your servicer, Chapter 13 is a workable tool for curing mortgage arrears while being protected from forclosure.